Big insto addresses CGT misconceptions

One technical consultant has stressed that while the CGT relief elections are technically only required before the lodgement of the tax return, there may still be critical action that needs to be undertaken before 30 June for segregated funds.

Speaking at an SMSF Association seminar, BT Financial Group senior technical consultant David O’Connell said while the ATO has said that elections should be made in the approved form by the date of the return for 2016-17, there may be critical preparation that needs to be done for clients with segregated funds before 30 June 2017.

r O’Connell said it is important to remember that the preparation for the CGT relief will be different depending on the structure of the fund.

“If the fund uses the segregated method, and you have to do something [to comply] before 30 June, then you need to prepare for it before 30 June,” he explained.

“When you’re dealing with the $1.6 million transfer balance cap and you have to commute out an amount as well, that’s the process you’re going to drive all the CGT relief from.”

If the fund is using the proportional method, on the other hand, or they have a transition to retirement income stream that can just continue to run and receive payments and there’s no new application for a pension, then there is more time to address the actions that need to be taken in response to the relief, Mr O’Connell said.

“In both cases, you actually tick the box beside the asset when you make the election so that is when you’re doing the return,” he said.

“So with a TTR where you don’t actually have to do anything before 30 June, you don’t have to actually have to do anything until you nominate the assets at the time of the return.”